Growth down the line for Billabong

SEP 2010

Billabong is forecasting up to 8 per cent growth in FY11 banked on stable conditions in the Americas, continued strength in Europe and a dashing foray into China.

The surfing retailer has established a new joint venture in China with entry via a series of shop-in-shop concepts, the first of which have opened in the southern China provinces of Shenzen and Guangzhou.

The company recorded a net profit of $146 million for FY10 – down 4.5 per cent on last year, but CEO Derek O’Neill remains optimistic.

“While the next 12 months are expected to remain challenging, a number of new Initiatives were implemented and, coupled with a range of acquisitions, these have positioned the group well for future growth,” he says.

The Burleigh Heads’ company views the 2010-11 financial year as a transition year with retail acquisitions likely to continue. It follows the acquisition of 36 Rush stores and a smattering of Surfection stores in Sydney last month.

Earlier this year the company acquired the Canadian West 49 chain; Californian brand RVCA; and raft of surf stores. It also owns brands including Von Zipper, Element, DaKine, Nixon, Sector 9, Tigerlily, Honolua, Kustom and Xcel.

O’Neill says FY10 profit was adversely impacted by the ‘unfavourable effect’ of the continued appreciation of the Aussie dollar against the group’s 16 functional currencies, in particular against the US dollar and the Euro.

“The group sells in more than 100 countries and the consumer environment generally remained volatile and difficult to predict,” he says.

“Overall, the group had an improved second half performance as the key market of the United States began to show signs of improvement and Europe remained solid, but there was a marked deterioration in trading in Australia late in the period that took some of the gloss off the result.

“The difficult trading environment also precipitated an acceleration in the evolution of the global action sports sector and the group proactively evolved its business to meet the change.”

European sales of $344 million were up 5.2 per cent, but down 11.3 per cent in reported terms. Sales of $712.6 million in the Americas were down 1.2 per cent in constant currency terms, or down 14.8 per cent in reported terms.

Australasian sales of $425.7 million were down 4.2 per cent.

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